Estate Recovery means that people who receive Medicaid benefits for nursing home level care can be subject to repaying the state for the costs of their care after they die. Typically, that means a claim against the home of the Medicaid beneficiary.
Prior to passage of the bill, Michigan was the only state in the nation that did not have such a law. Since 1993 the federal government has required all states to have an Estate Recovery law, however, Michigan has been out of compliance with that federal law since that time. As a result of recent federal pressure the State has adopted Estate Recovery.
That’s the bad news. On a brighter note, the law as adopted, provides many protections and opportunities to avoid the potentially harsh impact of Estate Recovery. The Estate Recovery law is full of traps for those that do not have the foresight to plan ahead with an experienced elder law and estate planning attorney. With proper planning you can still save your home! The key elements of the law are:
1. The Estate Recovery law ONLY applies to the probateable assets. Assets in revocable trusts are expressly not reachable, however, they are considered countable by Medicaid. While assets that pass by trust, joint ownership, beneficiary designations, payment on death designations, life estates, and enhanced life estates are not subject to Estate Recovery, the creation of any of these, in many circumstances, can result in a future disqualification for Medicaid. This is why it is critical to consult with an experienced elder law/estate planning attorney before taking any steps on your own.
2. If assets are subject to a probate estate, there are several exemptions to the Estate Recovery law such as those relating to farm property and other income producing property. There is also an exemption based upon 50% of the average price of all the homes in the county where the Medicaid recipient’s home is located. Additionally, there are exemptions for persons living in the home such as a spouse or a child (blind or disabled) as well as exemptions for a “caretaker relative” and some joint owners provided they live in the home.
3. Any recovery is capped at the actual cost of Medicaid medical services paid for on behalf of the recipient, without interest.
4. No Estate Recovery program will be implemented until “approval of the federal government is obtained.”
If an individual or their spouse is receiving long term care Medicaid benefits, or expects to be receiving long term care Medicaid benefits, they should have their estate plan established or reviewed to make sure the assets are set up in such a way to avoid being subject to Estate Recovery. In other words, plan if you haven’t and if you have, have your plan reviewed by an experienced elder law attorney.